Congestion pricing with fewer prices than zones

Electricity Journal

Volumn 11, Issue 4, 1998, Pages 23-31

  Stoft, Steven ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

COMMERCE; TRAFFIC CONGESTION;

CONGESTION PRICING; NODAL PRICES; POWER; ZONAL PRICES; ZONAL PRICING;

COSTS;

EID: 0032065668     PISSN: 10406190     EISSN: None     Source Type: Journal    
DOI: 10.1016/S1040-6190(98)00034-7     Document Type: Article

References (18)

1. 1. Hung-po Chao and Stephen Peck describe their proposal in three papers: H. Chao and S. Peck, A Market Mechanism for Electric Power Transmission, J. REG. ECON. 10(1) July 1996; H. Chao and S. Peck, An Institutional Design for an Electricity Contract Market with Central Dispatch, ENERGY J., Vol. 18, No. 1, Jan. 1997; H. Chao and S. Peck, Reliability Management in Competitive Electricity Markets (July 8, 1997) (Elec. Power Res. Inst. working paper).
2. 1. Hung-po Chao and Stephen Peck describe their proposal in three papers: H. Chao and S. Peck, A Market Mechanism for Electric Power Transmission, J. REG. ECON. 10(1) July 1996; H. Chao and S. Peck, An Institutional Design for an Electricity Contract Market with Central Dispatch, ENERGY J., Vol. 18, No. 1, Jan. 1997; H. Chao and S. Peck, Reliability Management in Competitive Electricity Markets (July 8, 1997) (Elec. Power Res. Inst. working paper).
3. 1. Hung-po Chao and Stephen Peck describe their proposal in three papers: H. Chao and S. Peck, A Market Mechanism for Electric Power Transmission, J. REG. ECON. 10(1) July 1996; H. Chao and S. Peck, An Institutional Design for an Electricity Contract Market with Central Dispatch, ENERGY J., Vol. 18, No. 1, Jan. 1997; H. Chao and S. Peck, Reliability Management in Competitive Electricity Markets (July 8, 1997) (Elec. Power Res. Inst. working paper).
4. 2. Draft documents describing IndeGO's proposal are available at http:// www.idahopower.com/ipindego1.htm
5. 3. The CCEM proposal is most clearly delineated in "Auctionable Capacity Rights and Market-based Pricing," by Tabors Caramanis & Associates with contributions from Robert Wilson, April 1997, available at http://www.tca-us. com/misc.htm
6. 4. The North American Electric Reliability Council's Interchange Distribution Calculator (IDC) was initially developed for the General Agreement on Parallel Paths and, in particular, by Ontario Hydro.
7. 5. The cheapest way to supply an extra 1 MW to bus 2 is to supply 0.5 MW from both generation buses at an average price of $35. Any greater reliance on the cheap generator will overload the congested line.
8. ij the price of the transmission capacity right for link (i,j)." It is this price of transmission capacity that corresponds to what I call the CP price.
9. 7. F. Wu and P. Varaiya, Coordinated Multilateral Trade for Electric Power Networks: Theory and Implementation (1995) (UCEI working Paper, PWP-031).
10. 8. F. SCHWEPPE, M. CARAMANIS, R. TABORS, AND R. BOHN, SPOT PRICING OF ELECTRICITY (Kluwer Academic Publishers, 1988).
11. 9. At http://www.nerc.com/~filez/dftf.html
12. 10. By using superposition and a reference bus, it is only necessary to compute N DFs for each congested line.
13. 11. In many flow-based schemes there is a 1 percent or 5 percent cutoff, which means that not all users have to buy rights on all lines. But this can leave considerable power flow unaccounted for because there are so many 5 percent flows.
14. 12. Chao and Peck, Market Mechanism, supra note 1.
15. 13. In his unpublished paper, Auctions of Transmission Capacity Reservations. (Dec 1996), Prof. Robert Wilson advocates a centralized FCC style auction and suggests that a "so-called Vickrey auction," similar to the one presented in this paper, is "expensive to develop and complicated to administer."
16. 14. Of course, a reconfiguration will often produce an unused remnant that needs to be sold at the next auction.
17. 15. S. Stoft, Transmission Pricing Zones: Simple or Complex?, ELEC. J., Jan./Feb. 1997, at 24.1 also argued in that article that from only K+1 nodal prices all the rest can be found from the power flows alone, without any knowledge of bids. This led me to search for an efficient pricing system using K+1 prices that could be used in place of inefficient zonal pricing. While considering the use of NERC's IDC calculator as the basis of a congestion auction I stumbled on the present system but soon realized that these prices had been employed by Chao and Peck years ago.
18. 16. This point is subtle, but note that if K+1 were greater than Z, then there would be more than Z distinct nodal prices and the network could not be broken into only Z uniformly priced zones.